The Corner

Lee-Rubio and the Upper Middle Class

Shikha Dalmia takes more shots at the Lee-Rubio tax plan in her latest column for The Week. This column is more accurate than the previous one touching on the subject. It is still careless, though. She mixes up the child tax credit that Lee and Rubio want to expand with the child-care tax credit, applicable only against paid child care, that President Obama does.

The crux of her argument is here:

The big losers would be the many families making between $150,000 and $411,500 — or the vast middle and upper middle class who are supposed to be the purported beneficiaries of these reforms. Rubio and Lee’s proposed 35 percent tax rate would constitute a big tax hike for these families. Some of the increase would be mitigated if they have children and can avail themselves of the child tax credit. But still, it’ll be a tax hike.

First: This is not a reasonable definition of the “vast middle and upper middle class.” If your household is making more than $150,000 a year, you are in the top 10 percent of American earners. Second: Even within this group, many people would see lower tax bills under the Lee-Rubio plan. That’s primarily because married couples currently in the 25 percent tax bracket, with taxable income between roughly $75,000 and $150,000, would pay a 15 percent rate under the plan. Households with higher income than that get the benefit of that tax cut: They would pay lower taxes on the second $75,000 they make.

See the illustrative examples given on p. 23 of this document put together by the senators’ offices. Using reasonable assumptions about mortgage interest and the like, the document projects that a household making $200,000—and thus in the top 5 percent—would get a tax cut of $12,300 from the plan. That example assumes the household includes two children. Assume the couple has no children, though, and the tax cut would still be $7,300. They don’t sound like big losers to me.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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